The Mandatory Provident Fund Schemes Authority (MPFA), which manages Hong Kong’s pension system, is considering making changes to its rules to help pension savers realize their dream of owning their first home, the Hong Kong Economic Journal reports.
While the government is set to launch a starter homes scheme to provide more affordable flats, the financial burden of owning a home is still quite heavy for many.
To ease the burden for first-time home buyers, the authority said it is studying the feasibility of allowing pension savers to withdraw funds from their accrued benefits under the MPF scheme before retirement.
The MPFA said it is studying the pros and cons of such an arrangement amid calls that MPF members be allowed to use their savings to acquire a home while still working.
Under the current rules, all members are not allowed to withdraw accrued benefits from their MPF accounts before reaching the age of 65, except for early retirement, permanent departure from Hong Kong, total incapacity, terminal illness, small balance or death.
Although early withdrawal from the fund goes against the purpose of the pension scheme, which is to force people to save for their retirement, the MPFA is now considering whether the current arrangement can be modified.
Acquiring a home and saving for retirement are long-term investments. In fact, having a home of their own can help pension savers gain stable income after they retire if they choose to put a reverse mortgage on their homes, the authority said.
However, it also pointed out that discretion must be exercised when it comes to withdrawing MPF funds early for home buying because doing so may affect savers’ equity that they can enjoy upon retirement.
MPFA chairman Dr. David Wong Yau-kar, who came up with the idea two years ago, said the authority has a draft of the proposal and discussions with the government are underway.
Secretary for Financial Services and the Treasury James Henry Lau Jr. told the Legislative Council on Wednesday that the concept of allowing early withdrawal of MPF funds for home acquisition is worth considering but more studies and more comprehensive deliberation are necessary.
Citing official data that shows MPF participants owned HK$183,000 in their accounts on average as of July this year, Lau said such an amount may not help home buyers much.
He also said it is not proper to make a comparison between the MPF scheme and Singapore’s Central Provident Fund (CPF), which allows contributors to withdraw money from the accounts to buy homes.
He noted that the CPF scheme has three sub-accounts: for retirement, home purchase and medical services. Besides, the contribution rate for the CPF could reach 37 percent, compared with the MPF’s 10 percent.
Professor Terence Chong, who heads the Lau Chor Tak Institute of Global Economics and Finance of the Chinese University of Hong Kong, suggested that an effective way is to cut the ratio of down payment required for first-time home buyers to 30 percent of the total price.
Independent economist Dr. Andy Kwan Cheuk-chiu, who was a former member of the government’s Long Term Housing Strategy Steering Committee, also recommended lowering the ratio of down payment for first-time home buyers, adding that if those home buyers need more funds, an upper limit, such as 5 to 7 percent of the home price, should be set for how much people can withdraw from their MPF accounts before retirement.
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